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Superfunds July 2014
Superannuation has received some bad
press lately, on the basis that it has not
yet, and may never, lead to very few
people being on the Age Pension.
It is easy to set something up for failure if you
set an unrealistic target. For instance, deciding
that a ‘get-fit’ program is only a success if you
get every participant to successfully complete a
marathon run.
Saving for retirement is hardly a marathon run
–
it takes much longer to successfully complete.
However, like a get-fit program, it makes sense to
set goals for success or failure on a realistic basis,
both at an individual level and for society as
a whole.
In regard to superannuation, it is useful to
go back to the goals that were put forward
when the compulsory system was first being
proposed. I know what those goals were better
than most. I was on the Commonwealth team
that put together the submission to the then
Conciliation and Arbitration Commission on the
productivity wages claim to be paid in the form
of superannuation contributions. I remember
those days well – I will never get back the hours
and days spent in the hearing room listening to
the various counsel for unions, employers and
governments go through their submissions in
considerable detail.
One of the main objectives, indeed a principal
objective, was to deliver better retirement incomes
for Australians, particularly the 60 per cent or so
of employees who, at that time, did not receive
the benefit of any employer superannuation
contributions. Both the unions and the then
government wanted workers to retire on more
than just the Age Pension, as was the case
for those employed by various government
departments and agencies, and large companies
that were in superannuation funds.
Another objective was to deliver what was
effectively a wage increase in an economically
sustainable way. At the time, there were concerns
about the rate of inflation, and superannuation
contributions were seen as a form of deferred
wages that would not have immediate inflationary
effects. The increase in national savings resulting
from greater superannuation contributions was
a related objective.
Finally, the reduction in Age Pension
Great expectations
policy frontline
Ross Clare FASFA
Director of Research